Nietzsche, Austrians and Creative Destruction

Xerographica

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How many tabs are currently open on your browser? Right now I have 5 tabs open.

My computer, like all computers, has limited resources. Each tab requires some resources, so if I open up too many tabs, then I'll tie up too many resources and my computer will become sluggish and unresponsive. This will of course limit my productivity. So if I want to increase my productivity, I'll have to close some tabs. Doing so will free up resources for more valuable uses.

This is the basic concept of creative destruction...

1. we have limited resources
2. some uses of resources are more valuable than other uses
3. destroying less valuable uses frees up resources for more valuable uses
4. total value is increased

The question is...which uses should be destroyed? How do we determine which uses are less valuable? There are really only two ways to answer this question. Either you decide for yourself (capitalism) or somebody else decides for you (socialism).

Capitalism (private sector) is where you decide for yourself which of your tabs you'll close...while socialism (public sector) is where somebody else decides for you. Therefore, with capitalism, the allocation of your computer's resources will reflect your preferences...but with socialism, given that you're not free to choose, obviously there will be a disparity between the two. This is why capitalism results in the efficient allocation of resources while socialism does not. An allocation of resources is "efficient" if it accurately reflects the true preferences of consumers.

Last month a Crooked Timber Liberal blogger, Corey Robin, wrote an article for the Nation in which he drew a connection between Friedrich Nietzsche and the Austrian Economists..."Nietzsche's Marginal Children: On Friedrich Hayek". I'm not going to link you to it because the website has a popup...but I will link you to his recent post at Crooked Timber...Nietzsche, Hayek, and the Austrians: A Reply to My Critics. I'll also link you to John Holbo's (my favorite Crooked Timber Liberal) post on the topic...O upright judge! Is Hayek Like Nietzsche or not?

As you might have guessed from the intro of this post, one concept that both Nietzsche and the Austrians have in common is "creative destruction". Unlike Corey Robin, at least John Holbo uses the term "creative destruction"...but that's all he does is use the term.

A while back I added a couple passages to the Wikipedia article on creative destruction. The first was a passage by Nietzsche...

But have you ever asked yourselves sufficiently how much the erection of every ideal on earth has cost? How much reality has had to be misunderstood and slandered, how many lies have had to be sanctified, how many consciences disturbed, how much "God" sacrificed every time? If a temple is to be erected a temple must be destroyed: that is the law - let anyone who can show me a case in which it is not fulfilled! - Friedrich Nietzsche, On the Genealogy of Morality

...and the second was a passage by an Austrian Economist...

These economic facts have certain social consequences. As the critics of the market economy nowadays prefer to take their stand on "social" grounds, it may be not inappropriate here to elucidate the true social results of the market process. We have already spoken of it as a leveling process. More aptly, we may now describe these results as an instance of what Pareto called "the circulation of elites." Wealth is unlikely to stay for long in the same hands. It passes from hand to hand as unforeseen change confers value, now on this, now on that specific resource, engendering capital gains and losses. The owners of wealth, we might say with Schumpeter, are like the guests at a hotel or the passengers in a train: They are always there but are never for long the same people. Ludwig Lachmann, The Market Economy and the Distribution of Wealth

Life is dynamic...circumstances are constantly changing. As such, people's preferences are not fixed. One minute you're thirsty, so you spend a $1 on some lemonade...and the next minute your thirst has been quenched.

The capitalist society is a democracy in which every penny represents a ballot paper. It is a democracy with an imperative and immediately revocable mandate to its deputies. It is a consumers' democracy. By themselves the producers, as such, are quite unable to order the direction of production. This is as true of the entrepreneur as of the worker; both must bow ultimately to the consumers' wishes. And it could not well be otherwise. People produce, not for the sake of production, but for the goods that may be consumed. As producer in an economy based on the division of labour, a man is merely the agent of the community and as such has to obey. Only as a consumer can he command. - Ludwig von Mises, Economic Democracy

Each penny that you are free to spend is a vote for the continued creation of a product/service that matches your preferences. But each penny that you spend on lemonade is a penny that cannot be spent on soda, carrot juice, a new computer or any of the other millions and millions of other products/services.

Likewise, each second you spend reading this post is a second that cannot be spent reading other posts. Each second you spend replying to this post is a second that cannot be spent replying to other posts. In other words, there's always an opportunity cost. Spending is always creating/destroying...

By preferring my work, simply by giving it my time, my attention, by preferring my activity as a citizen or as a professional philosopher, writing and speaking here in a public language, French in my case, I am perhaps fulfilling my duty. But I am sacrificing and betraying at every moment all my other obligations: my obligation to the other others whom I know or don’t know, the billions of my fellows (without mentioning the animals that are even more other others than my fellows), my fellows who are dying of starvation or sickness. I betray my fidelity or my obligations to other citizens, to those who don't speak my language and to whom I neither speak or respond, to each of those who listen or read, and to whom I neither respond nor address myself in the proper manner, that is, in a singular manner (this is for the so-called public space to which I sacrifice my so-called private space), thus also to those I love in private, my own, my family, my son, each of whom is the only son I sacrifice to the other, every one being sacrificed to every one else in this land of Moriah that is our habitat every second of every day. - Jacques Derrida, The Gift of Death

Markets give you the freedom to decide for yourself what you're willing to pay/give up/sacrifice/exchange/trade for the things you want. As a result, the allocation of resources reflects the true preferences of consumers. The allocation of resources is efficient.

One critique that Holbo brought up is that the idea that markets make it so that some people have more economic freedom than other people. But isn't it intuitive that some people belong in jail? Do we really want Jeffrey Dahmer to have as much freedom as Michael Moore?

Why does Michael Moore have more economic freedom than most of us? Here's his answer...

I'm a millionaire, I'm a multi-millionaire. I'm filthy rich. You know why I'm a multi-millionaire? 'Cause multi-millions like what I do. That's pretty good, isn't it? - Michael Moore

Should Moore have more economic freedom than the rest of us? Personally, I don't think so, which is why I don't give him my money. I don't give him my money because I don't value how he is using society's limited resources.

Money is positive feedback. If you derive value from how somebody is using their limited resources, then you give them your positive feedback. If you take away consumer's freedom to give producers their positive feedback, then it's inevitable that we will greatly reduce how much value we derive from how society's limited resources are used.

So when you open and close tabs...don't take your freedom for granted. Understand that your preferences are determining how society's limited resources are allocated. In other words, it's demand that's determining supply. It's demand which is determining what is destroyed and what is created. It's demand which is determining which uses of society's limited resources are more valuable than other uses.

Given that the government cannot know your true preferences for public goods, it's a given that the government will supply the wrong quantities of public goods. This is what's wrong with the public sector. It's absurd to believe that 300 congresspeople can know the true preferences of 300,000,000 people better than those 300 million people can. It's the epitome of conceit. Hayek, Mises and Bastiat understood the value of individual foresight...which is what made them Austrians...

If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. - Frédéric Bastiat

But was Nietzsche an Austrian?

Every animal, including the bête philosophe, instinctively strives for an optimum of favorable conditions under which it can expend all its strength and achieve its maximal feeling of power; every animal abhors, just as instinctively and with a subtlety of discernment that is "higher than all reason," every kind of intrusion or hindrance that obstructs or could obstruct his path to the optimum (– it is not his path to ‘happiness’ I am talking about, but the path to power, action, the mightiest deeds, and in most cases, actually, his path to misery). Thus the philosopher abhors marriage, together with all that might persuade him to it, – marriage as hindrance and catastrophe on his path to the optimum. Which great philosopher, so far, has been married? Heraclitus, Plato, Descartes, Spinoza, Leibniz, Kant, Schopenhauer – were not; indeed it is impossible to even think about them as married. A married philosopher belongs to comedy, that is my proposition: and that exception, Socrates, the mischievous Socrates, appears to have married ironice, simply in order to demonstrate this proposition. Every philosopher would say what Buddha said when he was told of the birth of a son: ‘Râhula is born to me, a fetter is forged for me’ (Râhula means here ‘a little demon’); every ‘free spirit' ought to have a thoughtful moment, assuming he has previously had a thoughtless one, like the moment experienced by that same Buddha – he thought to himself, ‘living in a house, that unclean place, is cramped; freedom is in leaving the house’: so saying, he left the house. The ascetic ideal points the way to so many bridges to independence that no philosopher can refrain from inwardly rejoicing and clapping hands on hearing the story of all those who, one fine day, decided to say ‘no’ to any curtailment of their liberty, and go off into the desert: even granted they were just strong asses and the complete opposite of a strong spirit. Consequently, what does the ascetic ideal mean for a philosopher? My answer is – you will have guessed ages ago: on seeing an ascetic ideal, the philosopher smiles because he sees an optimum condition of the highest and boldest intellectuality [Geistigkeit], – he does not deny ‘existence’ by doing so, but rather affirms his existence and only his existence, and possibly does this to the point where he is not far from making the outrageous wish: pereat mundus, fiat philosophia, fiat philosophus, fiam!… - Friedrich Nietzsche, On the Genealogy of Morality
 
Capitalism (private sector) is where you decide for yourself which of your tabs you'll close...while socialism (public sector) is where somebody else decides for you.

And pragmatarianism forces people to contribute to the tabs. Its just another form of coercion.
 
And pragmatarianism forces people to contribute to the tabs. Its just another form of coercion.

No no no. Pragmatarianism would reveal what the actual demand for coercion is. In other words, you have no idea how much of their taxes people would give to the IRS. If you did know the actual demand for coercion, then you would be omniscient and socialism would be a viable concept. But you are not omniscient, the preference revelation problem is a real problem, socialism is not a viable concept...we have no idea what the true demand for coercion really is.

But do you want to guess what the demand for coercion truly is? Is there a huge demand for coercion? If so, then so much for anarcho-capitalism. If not, then so much for your argument against pragmatarianism. If there's only a small demand for coercion, if only a few people give their taxes to the IRS, then the IRS could not be considered a legitimate public good. Why? Because enough of the people have to truly support (Willingness To Pay) a PUBLIC good in order for it to be considered a PUBLIC good.

So are you omniscient? Do you know what the actual demand for coercion really is? Or do you want to guess what the actual demand for coercion really is? Do you guess that there's a huge demand for coercion? Do you guess that it's the preference of most citizens to rob/eat their neighbors?

A further point: in a profound sense, no social system, whether anarchist or statist, can work at all unless most people are "good" in the sense that they are not all hell-bent upon assaulting and robbing their neighbors. If everyone were so disposed, no amount of protection, whether state or private, could succeed in staving off chaos. Furthermore, the more that people are disposed to be peaceful and not aggress against their neighbors, the more successfully any social system will work, and the fewer resources will need to be devoted to police protection. Murray Rothbard, Society without a State
 
No no no. Pragmatarianism would reveal what the actual demand for coercion is. In other words, you have no idea how much of their taxes people would give to the IRS. If you did know the actual demand for coercion, then you would be omniscient and socialism would be a viable concept. But you are not omniscient, the preference revelation problem is a real problem, socialism is not a viable concept...we have no idea what the true demand for coercion really is.

But do you want to guess what the demand for coercion truly is? Is there a huge demand for coercion? If so, then so much for anarcho-capitalism. If not, then so much for your argument against pragmatarianism. If there's only a small demand for coercion, if only a few people give their taxes to the IRS, then the IRS could not be considered a legitimate public good. Why? Because enough of the people have to truly support (Willingness To Pay) a PUBLIC good in order for it to be considered a PUBLIC good.

So are you omniscient? Do you know what the actual demand for coercion really is? Or do you want to guess what the actual demand for coercion really is? Do you guess that there's a huge demand for coercion? Do you guess that it's the preference of most citizens to rob/eat their neighbors?

Should there be a demand for theft?
 
can we all be into creative destruction without being nihilistic or negatively atavistically pagan or scorched earth?
or is a "creative destruction" actually at the core of all wars well long past a coercive and/or covetous cruel greed?
 
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No no no. Pragmatarianism would reveal what the actual demand for coercion is. In other words, you have no idea how much of their taxes people would give to the IRS. If you did know the actual demand for coercion, then you would be omniscient and socialism would be a viable concept. But you are not omniscient, the preference revelation problem is a real problem, socialism is not a viable concept...we have no idea what the true demand for coercion really is.

But do you want to guess what the demand for coercion truly is? Is there a huge demand for coercion? If so, then so much for anarcho-capitalism. If not, then so much for your argument against pragmatarianism. If there's only a small demand for coercion, if only a few people give their taxes to the IRS, then the IRS could not be considered a legitimate public good. Why? Because enough of the people have to truly support (Willingness To Pay) a PUBLIC good in order for it to be considered a PUBLIC good.

So are you omniscient? Do you know what the actual demand for coercion really is? Or do you want to guess what the actual demand for coercion really is? Do you guess that there's a huge demand for coercion? Do you guess that it's the preference of most citizens to rob/eat their neighbors?

"Demand for coercion" is a stupid argument. That's like demand for rape. Is it "economically inefficient" to outlaw rape?

That would only make sense if the people funding the IRS would be the only people who are being taxed.

The underlying justification for public goods is that only through the use of coercion a state can be reached which every single individual prefers to the free market state (at least after net-winners compensate net-losers and it's still everyone better off). According to the Coase theorem this could theoretically also be solved contractually but - so goes the argument - that's not possible because of high transaction costs.

However, as soon as one individual in society would prefer not to be coerced against and not having access to public goods - even if all the others compensate the one to the point were they are not better off anylonger - this justification wouldn't hold anymore . The problem with this, though, is that this preference can - per definition - never be revealed (and revealed preferences are the only thing economists can actually work with if they don't want to become completely arbitrary). The reason for this is that if you gave everybody the option not to pay, they could still use the services, as public goods are by definition non-excludable. Since nobody would have to pay, nobody would (according to the simplified mainstream homo economicus) and we would be back were we started at. Similarily, publically stating that one is worse off with taxation and the public good than without both is also meaningless, since without any real economic action (like not paying - which is not allowed by law) there is nothing for an economist to analyze.

So no, if 99% of the country continue to fund the IRS and nothing but it in your scheme, because they like the idea of being taxed so much, this does not mean that the 1 remaining % of the people are better off than without any taxation at all. There is no logically sound way to show the supposedly positive economic effects of supplying public goods through coercion. You can build theoretical constructs where doing so would result in pareto-improvements, but in the real world it is impossible to show that any given good meets this criterion.

Also, because you limit the choices people can spend a portion of their income on, all you can really say about their preferences is that they prefer spending X to fund parks over spending it to fund wars. You can absolutely not deduce that they also prefer it over spending it for anything else that is not on your list of public good choices.
 
Should there be a demand for theft?

Right now the government supplies a certain amount of coercion. True/False
Does the supply meet the true demand for coercion? Yes/No

If you answer "yes" then you're arguing that socialism is a perfectly viable system. Why? Because you're arguing that government planners know what the true demand for coercion is.

First we find out what the true demand for coercion is...and THEN you can ask me whether the public has its heart in the right place.
 
"Demand for coercion" is a stupid argument. That's like demand for rape. Is it "economically inefficient" to outlaw rape?

How is it an argument? Would it be economically efficient for everybody to fly in a plane that was as safe as Air Force One?

The technology for reducing the number of plane crashes in this country is available. All we have to do is to treat every plane as though it were Air Force One. But, if we did, how many would be willing to pay the prices to fly from their hometown to Chicago - Richard B. McKenzie, Bound to Be Free

That would only make sense if the people funding the IRS would be the only people who are being taxed.

What are you talking about? I asked what the actual demand for coercion is. Do you know the answer? Obviously not. But here are the two possibilities...

A. Significant demand for coercion - many taxpayers give their taxes to the IRS, anarcho-capitalism is a moot point
B. Insignificant demand for coercion - few taxpayers give their taxes to the IRS, coercion cannot be legitimately considered a public good.
 
Right now the government supplies a certain amount of coercion. True/False
Does the supply meet the true demand for coercion? Yes/No

If you answer "yes" then you're arguing that socialism is a perfectly viable system. Why? Because you're arguing that government planners know what the true demand for coercion is.

First we find out what the true demand for coercion is...and THEN you can ask me whether the public has its heart in the right place.

If we were to base what we ought to do on what is, then every kind of evil and tyranny and misery can be justified.

This is the philosophical problem with pragmatism. One always "knows" too late. And the "knowledge" discovered is based on what is...and you cannot derive oughts from ises.

Pragmatism is a complete failure philosophically.
 
If we were to base what we ought to do on what is, then every kind of evil and tyranny and misery can be justified.

So you spend your money/time/energy/life combating something that isn't? Ever heard the expression "tilting at windmills"?

This is the philosophical problem with pragmatism. One always "knows" too late. And the "knowledge" discovered is based on what is...and you cannot derive oughts from ises.

Pragmatism is a complete failure philosophically.

How can you know something before you know it? What does that even mean? Here's how knowledge works...

Our creed is that the science of government is an experimental science, and that, like all other experimental sciences, it is generally in a state of progression. No man is so obstinate an admirer of the old times as to deny that medicine, surgery, botany, chemistry, engineering, navigation, are better understood now than in any former age. We conceive that it is the same with political science. Like those physical sciences which we have mentioned, it has always been working itself clearer and clearer, and depositing impurity after impurity. There was a time when the most powerful of human intellects were deluded by the gibberish of the astrologer and the alchemist; and just so there was a time when the most enlightened and virtuous statesman thought it the first duty of a government to persecute heretics, to found monasteries, to make war on Saracens. But time advances; facts accumulate; doubts arise. Faint glimpses of truth begin to appear, and shine more and more unto the perfect day. The highest intellects, like the tops of mountains, are the first to catch and reflect the dawn. They are bright, while the level below is still in darkness. But soon the light, which at first illuminated only the loftiest eminences, descends on the plain and penetrates to the deepest valley. First come hints, then fragments of systems, then defective systems, then complete and harmonious systems. The sound opinion, held for a time by one bold speculator, becomes the opinion of a small minority, of a strong minority, of a majority of mankind. Thus the great progress goes on, till schoolboys laugh at the jargon which imposed on Bacon, till country rectors condemn the illiberality and intolerance of Sir Thomas More. - Thomas Macaulay
 
So you spend your money/time/energy/life combating something that isn't? Ever heard the expression "tilting at windmills"?



How can you know something before you know it? What does that even mean? Here's how knowledge works...

Wow. So you, are not aware of the is/ought problem of ethics? Science, or a study of the nature of things, cannot ever tell you what you ought to do.

Oughts cannot validly be derived from what is. If the premise of an argument is descriptive, the conclusion must be descriptive as well. If your argument is "the nature of things is x", your conclusion cannot be "therefore we ought to do x".

This is the philosophical failure of pragmatism. It invalidly attempts to derive a prescription from a description. If the people in your pragmatarian utpoia wanted slavery and misery, you would have no valid argument against it. Whatever is, is right...according to your system. This is why you always shy away from saying anything is right or wrong. If the people pragmatically want one half of the people to be slaves, that is right according to you. The people have pragmatically spoken and shown us what is (which is ridiculous because what ought to be cannot be derived from that).
 
Wow. So you, are not aware of the is/ought problem of ethics? Science, or a study of the nature of things, cannot ever tell you what you ought to do.

I'm aware of the problem...which means that I'm aware of your complete failure to understand it. I posted this on my blog a while back...

Here's what the anarcho-capitalist David Friedman has to say on the topic of moral/deontological arguments versus consequentialist arguments.

The short version...

I generally prefer consequentialist arguments. I think I understand economics better than I understand moral philosophy, and possibly better than anyone understands moral philosophy. - David Friedman

The long version...

I guess the first thing is that it offers arguments which don't require that people already share your religion...using the term "religion" broadly. That as far as I can tell, nobody, whether deontological libertarians or communists or anyone else really has a really convincing argument to show that their moral views are right. Many people believe that they do but I don't think that they do. Ayn Rand, at least, presented an argument. Ayn Rand claimed in effect to have defeated David Hume's is ought problem. Hume argued that you couldn't derive on ought from an is. I have a discussion up on my webpage of the holes in Rand's arguments. As far as I can tell she simply didn't do it. I don't think it can be done as far as I know. So in order to persuade people by a natural rights argument there has to be some reason why they believe in natural rights to start with because you don't have any good arguments to show that they ought to believe it. Whereas my argument...it claims to show...it hopefully shows...that my system would be better in terms of the value that almost everybody already has. So I'm really saying if you regard natural rights to be really important...well look...in my system rights will rarely be violated. If you regard people being happy and being healthy and living long lives...look in my society people will be in effect wealthier than in societies with governments, therefore you should like the results of those things...and so forth and so on. So I think that I have an argument which does depend on convincing people that economics is relevant to human behavior but doesn't depend on convincing them of your particular right and wrong beliefs.

Now the further problem with at least the versions of deontological libertarianism that I'm familiar with is that in the form in which people often state them they lead to conclusions that nobody believes. I spend a chapter in Machinery and Freedom going through that and if you really believe that the solution to polution is to say that nobody is allowed to pollute anybody else's property without their permission well you can't really exhale because carbon dioxide is a pollutant and you can be sure that some of the carbon dioxide you exhale will go onto somebody else's property. And similiarly you can't turn on a lightbulb because your photons will trespass. And once you start trying to make a more sophisticated version of the theory which deals with those...pretty quickly you start running into the kind of arguments that you run into in the consequentialist defense of libertarianism. - David Friedman, Legal Systems Without Government

In case you missed it, you're a deontological libertarian.

This is the philosophical failure of pragmatism. It invalidly attempts to derive a prescription from a description. If the people in your pragmatarian utpoia wanted slavery and misery, you would have no valid argument against it. Whatever is, is right...according to your system. This is why you always shy away from saying anything is right or wrong. If the people pragmatically want one half of the people to be slaves, that is right according to you. The people have pragmatically spoken and shown us what is (which is ridiculous because what ought to be cannot be derived from that).

I shy away from saying anything is right or wrong because I'm not here to push my own moral views on people. In case you missed it, this is the economics category. If you want to talk about moral philosophy...then please find the appropriate category. If you want to talk about how resources are allocated...then please keep your morals to yourself.
 
You are the one arguing it is possible to determine the "right" amount of coercion with your method (in case you missed it, that's a normative statement). It's not. Additionally, you've not once shown what the actual advantages of coercive taxation are. Your entire argument is flawed - from an economic perspective.
 
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I'm aware of the problem...which means that I'm aware of your complete failure to understand it. I posted this on my blog a while back...

Here's what the anarcho-capitalist David Friedman has to say on the topic of moral/deontological arguments versus consequentialist arguments.
The short version...
The long version...

In case you missed it, you're a deontological libertarian.

No sir I'm not. Neither consequentialist or deontological arguments are satisfying philosophically.



I shy away from saying anything is right or wrong because I'm not here to push my own moral views on people. In case you missed it, this is the economics category.

Yes you are here to push your moral view of institutionalized theft on everyone. Besides, nothing can be divorced from morality...not government, economics, "resources"...anything. Something like what you are presenting certainly cannot be divorced from morality, because you are advocating institutionalized theft.



If you want to talk about moral philosophy...then please find the appropriate category. If you want to talk about how resources are allocated...then please keep your morals to yourself.

Whose "resources"? How are these "resources" obtained? Through theft or coercion?
 
You are the one arguing it is possible to determine the "right" amount of coercion with your method (in case you missed it, that's a normative statement). It's not. Additionally, you've not once shown what the actual advantages of coercive taxation are. Your entire argument is flawed - from an economic perspective.

I'm arguing that you have no idea how much resources should be allocated in the fight against coercion when you have no idea what the actual demand for coercion is.

Whatever the actual demand for coercion is, I'm not arguing that the level of demand is "right" anymore than I'd argue that the level of demand for Brittney Spears is "right".

Regarding the economic advantages of coercion, that depends on the extent of the free-rider problem. People want the most bang for their buck. In other words, we are all utility maximizers. That's why, when it comes to certain goods, there's definitely an incentive to allow other people to pick up the tab.

Clearly you don't believe that society is better off by forcing people to contribute to collective goods. Fine. But given that the preference revelation problem is a real problem, you have no idea what the actual demand for coercion really is. So first we discover what percentage of the population doesn't trust that other people will voluntarily chip in, and then you can see exactly how big of an obstacle you're up against.

For all you know, right now you could simply be tilting at windmills. You could be making mountains out of mole hills. Like I said, maybe the demand is so insignificant that coercion, as a public good, would lose all legitimacy.
 
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